Legend has it that whenever a white elephant was spotted in Siam, the modern-day Thailand, it was marked as the king’s property. These elephants were considered sacred, making it incumbent upon the king to splurge money on their upkeep. Besides, the white elephant served another purpose, too. If the king was upset with someone, a white elephant would be gifted to the erring person. As the gift was from the king, it could not be refused, but as it was a sacred animal, too, no expense could be spared on its upkeep. While the recipient was slowly bled dry of his fortune caring for a largely useless gift, the king got his sweet revenge.
A Cautionary Tale
In my previous article, I had covered cost overruns and speculated on how India could service many infrastructure and health programmes with what Japan was spending on the 2021 Olympics. As I had made it clear then, the purpose of this exercise is to build a cautionary tale, and what better way to drive home the point than with the examples of other countries bled dry by this grand event that visits us every four years?
The Montreal mishap
The year 2006 was of significant importance for the city of Montreal in Canada. It marked the closure of a loan the city had taken to foot the bill of organising the 1976 games. In a nutshell, it took 30 long years for the city to pay off its debt after the Games cost overran. The city had spent $1.5 billion to organise the games, for which it had earmarked a measly $124 million. By the time the dust had settled, it found the costs had jumped by a whopping 720%. But the city had its smokers to thank for being able to pay off the debt in only 30 years. It imposed a special tax on tobacco to service the loan!
The Denver Example
In hindsight, Montreal should have taken cue from Denver, which is the only city till date to say no after bagging the hosting rights. Denver in the US state of Colorado was scheduled to hold the Winter Games in 1976, but chose to forego the rights in 1972 after realising that the cost of organising the Games was beyond what it could muster; also, the residents were not ready to tinker with the pristine ice-covered mountain ecology with new infrastructure for nothing more than the pride of organising the Games.
The Sochi Mess
Had Sochi, too, taken a wise decision, it could have spared the Russian taxpayers nearly $1 billion per year debt for many years to come. We had mentioned that sports-related expenses of Sochi Winter Games were close to $22 billion, but after adding all infrastructure over runs and cost inflation, the figure bloated to close to $50 billion, meaning the deficit had to be loaned by and paid for by the citizens.
Notable exits and why
More recently, Oslo and Stockholm decided that the escalating costs were beyond their bracket and withdrew their candidature for the 2022 Winter Games; Boston, too, backed out of the 2024 Summer Games’ hosting rights race. Interestingly, the other finalists for the 2024 Games – Budapest, Hamburg and Rome – also decided against their candidature, fearing cost escalation, leaving only Paris and Los Angeles in the race. Fearing that more bids would not be forthcoming for the 2028 Games, the International Olympic Committee decided to allot the 2024 Games to Paris and the 2028 slot to Los Angeles.
I dealt with the cost of bidding and organising the event without taking into account the pressure infrastructure like hotels, roads and ancillary services exert on the budget. Another dimension that we need to discuss is the kind of infrastructure needed for the IOC to take a city’s candidature seriously. A city seeking the hosting rights must be capable of holding over 25 sports and 310 events. It must also be capable of accommodating over 20,000 officials and lakhs of spectators. Despite this not being an exhaustive list, imagine the cost of building stadia for so many events; but what happens when the Games are over? What is guarantee of these grand facilities coming to use post-Olympics? What would be the cost of upkeep of such specialty stadia?
Bird's-eye View of Bird's Nest
While organising the 2008 Games, China spent close to $50 billion and among the many breath-taking infrastructure was a $460 million Bird’s Nest stadium. The yearly upkeep cost of the Bird’s Nest post-Olympics is pegged at $10 million, and, as per reports, it is mostly out of bounds for domestic events. Another factor to be considered is the human cost. In the run-up to Beijing Olympics in 2008, China displaced nearly 15 lakh people to make way for the state-of-the-art infrastructure, which, as we have already mentioned, is in disuse. Given it was China, not much hue and cry was raised. South Korea, too, left no stone unturned to make Seoul a spectacle for the ages. But the cost was borne by around 7 lakh people who were forced to leave their homes. Around 48,000 dwelling units were razed by the Korean officials to pave the path for a stellar show.
Japan this year might be able to ward off the cost of hospitality as this would be a no-spectator event, but it would still be foregoing revenue from ticket sales. According to the Kansai University estimates, the combined loss for Tokyo by staging Summer and Paralympics without spectators would be $23.1 billion. Remember Japan’s conservative estimate of the Tokyo spend is pegged at $15 billion, which means the city stands to lose $8 billion outright. However, the figures are likely to escalate as they do not take into account the $15 billion already spent/lost hosting the games.
So, are there not any success stories? There are, for instance, Los Angeles (1984) managed to earn a surplus, but it was largely due to the city already having the infrastructure to host the Games. Also, the city managed to arm-twist the IOC into favourable deals as not many were willing to organise the games, more so, after learning from what happened to Montreal. That are other examples as well, but with earnings so paltry that they are not the representatives of the pro-Olympics banner, but mere outliers.
India's Commonwealth Disaster
What India needs to do is to learn from the mistakes of richer nations and not inflict the same torture on its people. We received a small jolt in 2010 when Delhi hosted the Commonwealth Games. The mismanagement, corruption and bad press notwithstanding, the economic strain of the Games was as shocking as the consequences of botching up the event. India was suspended by the IOC for electing officials accused of corruption during the Commonwealth Games to Indian Olympic Association. This led to the athletes bearing the ignominy of not getting to represent India in the London Games 2012. Instead, they represented India under the IOC flag until the matter was resolved. On the financial front, India estimated the cost of running the show to be around $230 million, but by the time the Games were over, India had spent close to $10 billion, a steep 50-fold overrun.
All these examples are illustrative of the fact that the Games add little to the exchequer of the host cities; the fleeting pride vanishes overtime as a hapless city starts paying the EMIs and is burdened with the cost of upkeep of facilities whose reuse may be decades away. So, is spending billions to bring in a white elephant worth it?